How the Internet of Things is Creating New Business Models

The profound growth of the Internet of Things is creating new business models in which Big Business is becoming more open and collaborative and creating opportunities for startups, the CVCA Conference in Ottawa heard Wednesday.

A panel of the Internet of Things – in which machines communicate with one another and adjust automatically based on the data they send one another – revealed that this segment offers huge potential. Panelists also said the Internet of Things will be so big and so vast that companies will have to change their models, attitudes and processes. And that’s where the huge opportunities are being created.

“Atlantic Canada is primed for this,” Scott MacDonald, the cofounder of McRock Capital and the moderator of the panel, said later in the day. “It has all the resources needed for this space. It’s a university-rich environment and it has all the talent to capitalize on this.”

MacDonald said the Internet of Things is creating huge opportunity because it is growing so quickly. There are estimates that the segment will be worth $19 trillion by the end of the decade and that 50 billion devices will be connected to each other. In Atlantic Canada, especially in New Brunswick, several companies like Shift Energy, RtTech, Smart Skin and Eigen Innovations are forging ahead with IoT products.

Carl Stjernfeldt, the senior technology principal at Shell Technology Ventures, said major and small oil and gas companies are looking for productivity improvements in their operations, and understand that startups can produce the technology that brings about the improvement.

“There’s a square wave of technology coming into the oil patch and the majors know they can’t develop it themselves,” said Stjernfeldt, whose parent company is Royal Dutch Shell. He added that the big companies are acting “more rationally” and not demanding exclusivity when they adopt new technology. “Access to technology is the key; exclusivity is not,” he said.

In fact, companies are now coming to realize that having more players use new technology helps to improve new products and establishes industry standards, which helps everyone in the long run.

Stjernfeldt’s advice for startups approaching big companies is not to “get stuck in” the R&D division. He said startup founders often get comfortable making connections with researchers but the best route is to go right to the operations managers, the true end-users, and show them how the new product can improve their productivity and/or safety.

Victor Woo, general manager of the Internet of Things at Cisco, said his company is now investing $100 million in young companies involved in the Internet of Things, and is especially interested in what startups are doing in Canada. Last week, the company announced the Cisco Chair in Big Data at the University of New Brunswick.

Major companies are looking for solutions on how machines and devices can communicate, analyse and act instantly, and the complexities and opportunities are endless, he said.

“It’s all about handling data at a planetary level because we’re going to be dealing with 50 billion objects by 2020 and that’s massive,” said Woo.

The panel – which took place the annual meeting of the CVCA, Canada’s Venture Capital and Private Equity association – also highlighted that large companies are becoming more open to sharing their data because they understand it can result in productivity gains.

“It’s a business model that didn’t exist before,” said Stjernfeldt, gesturing to Woo on his left and a representative of GE Canada on his right. “I’m willing to let someone like Cisco or GE have access to my data. Then they can crunch it and I’ll buy it back. That’s new.”

The CVCA – Canada’s Venture Capital & Private Equity Association – represents the majority of private equity companies in Canada, with over 1500 members. CVCA members have over $65 billion in capital under management, in three distinct market segments:
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Peter Moreira

Peter Moreira spent more than 30 years in journalism in Asia, Europe and North America.
He worked with The Deal of New York, covering M&A, private equity and VC markets in the U.S. and Canada for six years and serving four years as London Bureau Chief. At Bloomberg, he covered European and U.K. banking and finance. He previously worked for the South China Morning Post in Hong Kong,...
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